Get Rid Of Small Business Financing Problems Once And For All
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Small business crediting
What small business financing problems you may face?
Every year small business loans are gaining more and more popularity among businessmen – crediting allows both establishing a new company and developing and expending the firm already existing.
They say that the main criterion the bank relies upon deciding on the crediting is the quality of loan security. But this is not true foe all the cases. The conditions for small business crediting are well-found profs that the loan will be paid out given to the bank administration. Regulatory documents of many banks do not allow providing loans which may be repaid only at the expenses of security sale.
So giving a credit to small businesses bank, first of all, is guided by their cash flow which forms both in their current activities and the investment project realization. Before turning to a bank the enterprise should estimate its investment projects and choose the most efficient one. Any bank takes in account calculations made by the staff specialists but makes conclusions on the base of its own models.
Conventionally all the projects are divided in investment crediting and project finance.
Investment Crediting
Investment crediting considers the lender‘s total economic activities - including incomes from the project realization – as the main source of payment. In this case the financial state of the enterprise is investigated in the dynamics of a standard accounting for the last 3 years. The main aim is to be sure that the balance sheet structure is stable, there are no problems with the budget and vendors, the enterprise can generate positive cash flow and is constantly developing. Whether any diseconomies are fixed in the balance the reasons for such a situation are analyzed.
Bank analyzes the enterprise crediting history – how accurately it makes loan payments. Bank considers short- and long-term credits, financial lease, long-term rent, machinery credit purchase and so on.
Project Finance
The process of the application consideration in the case of project finance is similar to that of the investment crediting still with some divergence. Bank focuses on the investigation of the project itself for in the majority of cases they deal with new firms established specially for the certain project realization. Special attention is giving to the finance risk distribution between the participants. The main condition is that the firm provides at least 30% of the sum to be put in the project. And even more accent is given to marketing, chosen developing strategy and main technical solutions. Basic project contracts are examined and sometimes the bank may demand additional guaranties for them.
